Hi I'm Jimmy in this video.
I'm gonna walk through my analysis of Uber now.
Uber stock has yet to start trading on the public market.
When they do their stock ticker will be UBER now.
Since Uber stock has yet to start trading are two main questions with this video are
going to be should be by Uber stock when they do go public.
And what do we think Uber stock is going to trade for.
So let's start with some of the basics of Uber so we can break Uber's business into
three main segments.
The traditional ride hailing business Uber Eats and then Uber freight.
So the traditional ride hailing business.
Well that's probably the one that we've all heard of.
And basically what they do is they provide essentially taxis access to rides they have
cars they have scooters.
Basically if you want to get from point A to Point B they can probably do it for you.
And on a personal basis I found that they can usually do it at a pretty good price.
So that's been the core of their business for a few years.
And then of their revenue we can see that revenue has been dominated by the ride hailing
business.
Then we have Uber eats.
Now Uber Eats was launched back in 2016 and Uber says they signed up about to more than
220,000 restaurants in more than 500 cities Uber eats contributed just over one point
five billion in 2018.
Then there are other section.
Well right now they're calling it other but that's where Uber freight is launched.
That was just launched in the middle of 2017.
Now what I like about these three lines of businesses is that they're all very complementary
to each other.
Each of them can use the same exact technology.
In fact if a driver is a driver let's say in the ride hailing business well they want
to make some additional money they can make some money using Uber eats as well.
They can do the two simultaneously in many cases.
Now customers can also jump around and I think this is a good way that Uber is utilizing
its advantages.
So although the revenue is dominated by the ride hailing business I expect each of the
three lines of business for Uber to do quite well.
Now this brings us to overall revenue.
Now revenue since 2014 has grown quite nicely back in 2014 Uber put up about 500 million
dollars in revenue and that's grown rather quickly to a bit over 11 billion in 2018.
And one metric that Uber has introduced is what they're calling monthly active platform
consumers.
Now this is a quarterly chart of monthly active platform consumers and we can see that just
a few years ago they had about 20 million users.
Now that number has jumped to more than 90 million users.
Now if nothing else this speaks to Uber is growth and that's worldwide growth.
Uber recently acquired a company called Careem basically Careem does what Uber does.
They just do it in the Middle East and a few other areas as well.
And all this is impressive but the negative side is that Uber is not profitable.
And if people are not excited to hear they're taking the bearish perspective well we're
likely to look at the fact that they're not profitable and that's a bad thing it's a valid
point.
But if we are trying to take the bullish perspective.
Well you might hear a story like this this is a chart of revenue next to operating income
over the past few years.
Obviously we can see that operating profit is negative but I read a few different articles
bullish articles that talked about this improvement right here.
And basically the theory is that Uber has turned the corner and this is the early indications
that profits are not too far away.
Now I also want to point out that this is operating profit not net income operating
profit doesn't include things like interest expense or gains or losses from currency exchanges.
And since we know that they have an international exposure that's becomes a thing for them.
So I just wanted to point this out.
So now our question is what is uber stock going to start trading at and should we buy
it once it does start trading.
So I'm sure that many of us know that Lyft stock Lyft is one of Uber is close competitors.
Well they went public already and they started trading just a few months ago.
And right now Lyft has a market cap of about seventeen point five billion dollars but Lyft
only did about two point two billion dollars in revenue in 2018.
While Uber put up more than eleven point two billion.
That means that Uber is more than five times the size of Lyft.
So let's just try to logic this off for a second.
Lyft currently has a market cap of about seventeen point five billion and Uber is more than five
times the size of Lyft but I actually think that Uber has better brand recognition.
I think they have more upside potential with things like Uber eats and uber freight.
So clearly that deserves something.
So instead of using a five times multiple for it's market cap let's use it six times
multiple.
So we take the market cap of Lyft.
We multiply it by the six to account for Uber size and quality premium.
And then we end up with a market cap of about one hundred and five billion but Uber has
long term debt of about six point eight billion.
Now clearly we want to adjust both companies for debt before we multiply them out like
we did.
But Lyft doesn't have any long term debt.
As of right now so Lyft seventeen point five billion dollar market cap is debt free.
So if we take the six point eight billion and we subtracted from one hundred and five
billion dollar market cap what we end up with a market cap of about 98 billion dollars.
Okay now that's logical and that's about right in line with what we've been saying and what
the investment bankers that are bringing the company public to have been saying.
So we don't really know how that would translate we're not a hundred percent sure what the
actual price per share is going to be because 1 We're not sure that at the end of the day
it's going to get valued the way we just calculated it or the way that Uber or investment bankers
want it to be brought to the public market.
But right now according to their S-1 filing they're saying that the stock will come public
at about forty four to fifty dollars per share.
And by the way the S-1 filing is where I end up getting a lot of my information from for
this video when I was doing my research I started the S-1 filing and S-1 filing is not
like the company's annual report except way more in-depth and companies only have to file
it when they first go public.
They're super informative and super crazy long.
So now the question is should we buy Uber stock when it finally starts trading.
Well we can't do that based on the value of Uber Stock since we don't know where it's
going to be trading it.
But personally I think it's usually a bad idea to invest in these types of companies.
When I first go public now maybe that's because I prefer to see some history some active trading
history.
Before I before I jump in on a stock I think that the market helps bring more information
out.
But I also think it's in the company's best interest in the investment bankers best interests
to bring the company public at it as high an IPO price as possible.
But once the markets get a hold of the company I feel like more information comes out it's
easy to make a determination as to true as to the true value of the company.
Not always but I think generally it's true.
Now another reason is that I don't think stocks like this tend to do that well coming out
of the gate.
Ali Baba stock as an example when that was first listed within a year it was trading
below its listed price of sixty eight dollars per share.
Now this chart is a bit deceiving because it jumped so quickly coming out of the gate
but they're not all that way.
If we go back to Facebook stock.
Well this is their chart back in 2012 and they first won public and almost immediately
it dropped.
If we switch over to Dropbox well Dropbox did the very same thing they were priced up
and almost immediately stocks started falling.
Spotify IPO tells a very similar story.
And then we have Lyft so many people calling Lyft's IPO a disaster.
And maybe it will be but from what I can see it looks very similar to other companies that
have gone public.
So for me I think it makes sense to wait about a year before even looking at investing in
a company that has recently gone public.
Now if you ever have the opportunity to invest in a company before it goes IPO Well there
could be a fortune to be made in that just as the venture capitalists that invested in
Uber.
So I'm sure they're gonna do quite great with this whole thing.
So for me I think it makes sense to stay away from IPO until the dust settles.
Now we're not percent sure where Uber Stock is going to be priced at.
They're saying somewhere between 44 and fifty dollars a share.
I heard that PayPal has agreed to buy 500 million dollars worth of Uber stock but I
haven't quite heard what price that's going to be at.
That's a good thing I think for the bulls.
Either way what do you think.
Do you think Uber stock is going to be a good buy when it first goes public.
Are you going to buy some of it or do you think it makes more sense to wait a year or
so.
Let me know what you think in the comments below.
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Thank you for stick with me all the way to the end of the video and I'll see in the next